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File photo of Stuart Gulliver, HSBC Group chief executive officer.© Bobby Yip / Reuters

The financial results of HSBC, one of the world's biggest banks, were overshadowed by a widening tax scandal that drew in CEO Stuart Gulliver himself and triggered an apology from the chairman for the bank's dubious behaviour.

On Monday morning, HSBC shares fell by almost 6 per cent after the bank reported full-year pretax profit of $18.7-billion (U.S.)in 2014, a 17 per cent fall over the previous year and well below analysts' forecasts. The fall took the shares to their lowest level in 2 ½ years and boosted their one-year loss to 13 per cent.

The results came as The Guardian reported that Mr. Gulliver, who received £7.6-million in pay and bonuses last year, had an account at HSBC's Swiss banking division until 2003 and sheltered millions of pounds in a Swiss account through a Panamanian company. Mr. Gulliver was born in Britain and runs HSBC from London, but for tax purposes is "domiciled" in Hong Kong.

The revelation about Mr. Gulliver's Panamanian and Swiss accounts came two weeks after HSBC was sent reeling by a barrage of reports from the International Consortium of Investigative Journalists, working in collaboration with The Guardian, the BBC, Le Monde and other media outlets, about sleazy practices at HSBC's Swiss private bank. The reports, based on leaks from an former HSBC employee, provided details on how the bank helped clients evade taxes between 2005 and 2007, including handing them "bricks" of untraceable cash and setting up offshore companies to hide their wealth from the taxman.

The publication of the reports triggered a raid by Swiss prosecutors on HSBC's office in Geneva, which is under suspicion of "aggravated money laundering."

A week after the reports appeared, Mr. Gulliver wrote an open letter to issue a "sincere apology" for the tax evasion revelations and insisted that HSBC's Swiss private bank has been completely overhauled. "We have absolutely no appetite to do business with clients who are evading their taxes or who fail to meet our financial crime compliance standards," he wrote.

This morning, when HSBC's results came out, the bank issued a fresh apology, this time from chairman Douglas Flint, who has been called to deliver evidence on Wednesday before the House of Commons treasury select committee. "The recent disclosures around unacceptable historical practices and behaviour within the Swiss private bank remind of how much there still is to do and how far society's expectations have changed in terms of banks' responsibilities," he said. "We deeply regret and apologize for the conduct and compliance failures highlighted which were in contravention of our own policies as well as expectations of us."

In prepared remarks along with the bank results, neither Mr. Flint nor Mr. Gulliver made any reference to Mr. Gulliver's Swiss and Panamanian banking activities. But in a conference call later this morning, Mr. Gulliver said the accounts were purely designed to ensure confidentiality from bank colleagues, not tax avoidance.

According to The Guardian, Mr. Gulliver's lawyers said he used the Swiss account to hold bonus payments made up to 2003, when he moved from Hong Kong to London. They said Hong Kong tax had been paid on this income and that "he followed this procedure because he wanted his taxed bonus earnings to remain private from his then colleagues in Hong Kong, which they would not have done if he had kept them in an HSBC Hong Kong account."

In a conference call this morning, Mr. Gulliver said the Panamanian account had been closed but would not comment on the status of any Swiss accounts.

The tax scandal has exposed HSBC to law enforcement and tax and regulatory investigations around the world, including Switzerland, Belgium, France, Argentina and India. The bank warned that there "is a high degree of uncertainty as to the terms on which they will be resolved and the timing of such resolutions, including the amounts of fines, penalties and/or forfeitures imposed on HSBC, which could be significant."

In a legal opinion prepared for the British consumer watchdog SumOfUs, Lord Ken Macdonald said there is enough evidence to investigate HSBC for conspiracy to defraud the British government of tax revenue.

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